OJ///
I have a feeling that if Fed rises it would be good, if Fed does not act that would lead to your NDX set back, inaction will lead the market to definitely think that Fed watch continues, this will weigh on the market ensuing (in case of inaction if any- I would think that hike will lead to set back and a rally and inaction a rally and a set back) rally may give me some points to buy some puts.. like 1407 area to go long on 1350 Dec...
ODDS SLIGHTLY IN FAVOR OF RATE HIKE:
Remarkably, there is no strong consensus on what action
Federal Reserve Chairman Alan Greenspan will take at
tomorrow's Federal Open Markets Committee meeting. Wall
Street Fed watchers are split down the middle, with a
slim majority favoring yet another rate hike.
Most economists see no reason for the Fed to raise rates
again tomorrow, but expect the central bank to tighten
anyway as a cautionary measure. Inflation remains absent,
but the Fed is believed to be worried about the economy's
extraordinarily fast growth.
Explains Steven Slifer, chief economist at Lehman Bros.
and a leading Fed watcher: "With a productivity growth of
3% and a growth in the labor force of 1%, the economy
should be able to sustain an output of 4%. However,
third-quarter growth is likely to be revised upward from
4.8% to 5.7%. This puts pressure on the Federal Reserve
to slow down the economy."
He adds that a rate hike tomorrow would likely be the
last in this monetary cycle. Greenspan is likely to tread
carefully in the next few months because of uncertainty
surrounding the impact of the Y2K computer problem. The
Fed is still "taking back" earlier rate cuts, so a
further tightening would imply a controversial shift
toward a tightening stance, Slifer says.
Whatever action the Fed takes tomorrow, the impact on
markets will be muted. Bond markets have already priced
in about two thirds of the rate hike. If the Fed doesn't
hike tomorrow, it will likely do so early next year,
according to Elizabeth Mackay, chief market strategist
at Bear, Stearns & Co.
|
